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Back to negotiations after student loan plan fails

Posted:
07/11/2013 01:00:00 AM EDT

Thursday July 11, 2013

WASHINGTON (AP) -- The defeat of a student loan bill in the Senate on Wednesday clears the way for fresh negotiations to restore lower rates, but lawmakers are racing the clock before millions of students return to campus next month to find borrowing terms twice as high as when school let out.

Republicans and a few Democrats blocked a White House-backed proposal that would have restored 3.4 percent interest rates on subsidized Stafford loans for one more year. The failed stopgap measure was designed to give lawmakers time to take up comprehensive college affordability legislation and dodge 6.8 percent interest rates on new loans.

Without congressional action in the coming weeks, the increase could mean an extra $2,600 for an average student returning to campus this fall, according to Congress’ Joint Economic Committee.

"Let’s just extend this for one year. I don’t think that’s too much to ask," said Democratic Sen. Tom Harkin of Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee.

It proved too much for a bipartisan group of lawmakers, led by Sen. Joe Manchin, D-W.Va. They favored a compromise now and joined with Republicans in using a procedural roadblock to stop the one-year patch.

"This plan merely kicks the can down the road for 12 more months," said Sen. Richard Burr, R-N.C.

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, who worked with Manchin and Sen. Angus King, I-Maine, on a deal that linked interest rates to financial markets. "We’re going to vote on a 3.4 percent extension, kicking the can down the road and not finding a solution,"

The Senate vote was 51-49, nine votes short of the 60 votes needed to move forward.

The Republican-favored plan that Manchin helped to write was not considered for a vote in the Democratic-controlled Senate.

But that proposal was the subject of an evening session among leaders from both parties about next steps.

Without serious negotiations between the parties and without an agreement within a fractured Democratic caucus, students would face higher costs when they begin repaying their loans after graduation. Lawmakers pledged to return to negotiations to avert that, and aides were gauging what was possible given the narrow window before Congress breaks again for the August recess.

"Today our nation’s students once again wait in vain for relief," said Sen. Tom Udall, D-N.M. "They expected more of us and I share their disappointment."

"Today, we failed. And our nation’s students pay the cost of that failure," he added after the vote.

The failure to win a one-year approval, combined with little interest in such a deal in the Republican-led House, meant that unless Congress tries again, students could be borrowing money for fall courses at a rate leaders in both parties called unacceptably high.

Officials said Wednesday’s vote would not be the final word on student loans and that it would nudge members from both parties back to the negotiating table. Even those who favored an extension said they were not inflexible.

Harkin, for instance, said he was not wedded to 3.4 percent interest rates forever and was open to a different approach, as long as profits from student lending weren’t used as a way to pay down the nation’s deficit.

A Harkin ally said compromise is possible if Republicans are willing to yield as well.

"I will continue to work hard to reverse this senseless rate hike," said Sen. Jack Reed, D-R.I., who helped push extension measures. "Ultimately, we’ll need a bipartisan solution, but first Congress will have to do its homework. Republicans will have to come to the table and agree to address the bigger picture of college affordability in a meaningful and comprehensive way."

The administration said the vote would not inevitably consign students to higher rates.

"I wish we would have got this done before July 1 but I remain very optimistic that we’re going to get to a better place for students," Education Secretary Arne Duncan said.

"We’re going to get it done sooner than later," he told reporters at a department event about summer reading.

Interest rates on student loans doubled to 6.8 percent July 1 because Congress didn’t act. After Wednesday’s vote, the political sparring continued.

"Today’s vote is just another example of how out of touch Republicans in Congress are with the struggles of everyday American families," said Sen. Patty Murray, D-Wash.

Rep. John Kline, chairman of the House Education and the Workforce Committee, similarly blamed Democrats.

"Right now, millions of students trying to prepare for college and apply for financial aid are facing higher interest rates - all because a cadre of Senate Democrats is completely unwilling to compromise," said Kline, R-Minn.

The rate increase does not affect many students right away. Loan documents generally are signed just before students return to campus, and few students returned to school over the July Fourth holiday. Existing loans were not affected, either.

During last year’s presidential campaign, lawmakers from both parties voted to keep interest rates on subsidized Stafford loans at 3.4 percent. Yet this year, without a presidential election looming, the issue seemed to fizzle and the July 1 deadline passed without action.

The White House and most Democratic senators favored keeping the rates at 3.4 percent for now and including an overhaul of federal student loans in the Higher Education Act rewrite lawmakers expect to take up this fall.

The House has passed legislation that links interest rates to financial markets. House Republicans were opposed to a one-year extension, meaning the Senate vote might not have fared well with them.

"Republicans acted to protect students from higher interest rates and make college more affordable, yet Senate Democratic leaders let student loan interest rates double without passing any legislation to address the issue," House Speaker John Boehner, R-Ohio, said after the vote.

The leader of one young adult advocacy group was more direct in his criticism.

"The White House and Congress seem to be competing with each other over who can screw over students worse," said Evan Feinberg, president of the nonpartisan Generation Opportunity. "And Senate Democrats are clearly winning."

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